Government spending may be slowing but regulatory output is not. The number of regulations passed the one million mark in 2010, and their volume continues to rise. What does the continuing growth of so many rules mean for the U.S. economy and individual industries?

1. Regulation University:
The Consequences of
Regulatory Accumulation
February 28, 2014
Patrick A. McLaughlin
Senior Research Fellow
Mercatus Center at George Mason University

3. What is regulatory accumulation?

4. Why is it a problem?
1. Blocks innovation and
entrepreneurship
2. Diverts attention from new and
important risks
3. Wastes scarce agency resources

5. Less innovation = less growth
in trillions of real dollars
60
What would GDP have been in 2011
if regulations had stayed at 1949 levels?
$53.9 trillion
50
40
30
20
$15.1 trillion
10
0
Actual GDP
Potential GDP

6. $30,000
$25,000
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
in billions of dollars
Actual and Alternative Growth Paths
$35,000
Hypothetical Economy
Actual Economy
$20,000
$15,000
$10,000
$5,000
$0

7. Example: Design standards
Design standards on
trains, automobiles –
prevents innovation
domestically and trade
internationally

8. Example: Logan City, Utah

9. Why does it occur?
1. Incentives of agencies
2. Incentives of politicians
3. Incentives of incumbent firms

10. Aren’t there already
requirements for review?
1. Exec. Order 12866
2. Presidential initiatives

11. Current process ineffective at review

12. No Independence = No Results

13. Can we solve this?
1. Independent review
2. Focus on risk and outcomes
3. Overcome groups with vested
interests in keeping nonfunctional
rules

14. Independent review
1. BRAC
2. Scientific peer-review

19. First test of functionality: Risk
Nonsignificant
Significant risk risk
Current risk Functional
Nonfunctional
Noncurrent
risk
Nonfunctional Nonfunctional

20. Second test of functionality:
Outcomes
Achieving
outcome
Not achieving
Necessary
to maintain
outcome
Functional
Nonfunctional
Not
necessary
to maintain Nonfunctional Nonfunctional

21. Overcome groups with vested
interests in keeping rules
1. Agencies
2. Incumbent businesses
3. Special interest groups

22. Questions?